More than five million Australian workers will continue to receive the JobKeeper wage subsidy until March 2021.
But the rate will be reduced from $1,500 a fortnight to $1,200 – and new eligibility tests will be introduced to ensure the money only goes to those genuinely in need.
The Morrison government was due to announce details of the changes to the support on Thursday, but has brought forward the decision to Tuesday.
Since April, the $70billion scheme has been providing $1,500 a fortnight wage subsidies to 3.5million workers whose employers have struggled with COVID-19 shutdowns.
The program, announced in late March, was due to end on September 27 but Treasury has advised the government to keep it going to avoid businesses going bankrupt.
JobKeeper will be extended for an additional six months from the end of September, when it will be split into two tiers based on the number of hours worked.
Prime Minister Scott Morrison greets workers as he arrives for a visit to DisplayWise in Sydney on Monday
‘Businesses have planned on the availability of JobKeeper for six months and there are risks in withdrawing support from those that have begun to recover,’ the Treasury advice seen by Daily Mail Australia said.
‘The case for extending JobKeeper beyond September is strong, especially if coupled with a fresh eligibility test that targets support to those businesses and sectors that continue to need it.’
Treasurer Josh Frydenberg previously hinted the wage subsidy program would run until March 2021, with his home city of Melbourne in lockdown.
‘JobKeeper has been an economic lifeline to millions of Australians and that lifeline will be extended for those businesses that need it most,’ he said.
The JobSeeker unemployment benefit has been temporarily doubled since April 27 and the government is likely to permanently boost the dole when the temporary $550 a fortnight coronavirus supplement ends in September.
While JobKeeper is being extended, businesses continuing to receive it will get $1,200 a fortnight instead of $1,500.
‘It may also be appropriate at this juncture to consider reducing payments to wean off businesses from ongoing support,’ Treasury said.
From the end of September, JobKeeper will be split into two tiers based on the hours worked to avoid part-time workers getting huge pay rises.
The top tier payments will be $1,200, while the lower threshold will be determined by the number of hours worked.
The adjustment comes after a Treasury review found that some part-time workers and casuals received an increase in income while on the full JobKeeper rate.
JOBKEEPER 2.0: WHAT WE KNOW
The new version of JobKeeper will mirror the part-time or full-time hours recipients worked before the coronavirus pandemic rather than a flat $1500 a fortnight.
The revamped scheme will mean businesses benefiting from the subsidy will get several months to adjust to the second phase.
The JobSeeker dole payment that was doubled to help the jobless get through the pandemic will remain as it is until September but then switch to a lower rate, but will be more than the former Newstart payment.
The government is also set to release details of a review of its coronavirus supports.
Prime Minister Scott Morrison says businesses would get several months to adjust to the next phase of support.
‘It will be targeted, it will be temporary, it will be effective as the first round has been,’ he said in Sydney.
‘We do know this first round has been very important … (for) almost one million businesses, around 3.5 million employees, and there is still two months to go on the current set of arrangements.’
More details are set to be revealed on Tuesday.
The JobKeeper scheme had disproportionately benefited teenagers, with their wages soaring by an average of 16.8 per cent in the seven weeks to early May.
Every other age group saw their pay levels plunge by 5.4 per cent.
Outgoing Finance Minister Mathias Cormann said a pared back JobKeeper would address those kind of flaws.
‘What the review also found was that there were a number of features of JobKeeper that created adverse incentives which may become more pronounced over time as the economy recovers,’ he said.
‘This formed part of our considerations as we looked at the next phase of the JobKeeper program.’
Treasury advisers were worried about JobKeeper propping up zombie firms that would otherwise have closed.
Treasurer Josh Frydenberg has also hinted the wage subsidy program will run until March 2021, with his home city of Melbourne in lockdown. Pictured is the Bourke Street Mall
JobKeeper is being extended beyond the end of September because the government is worried about businesses potentially collapsing if it’s withdrawn too soon. Pictured is a barista in Sydney on July 1
Unemployment during June amid COVID-19
Australia’s unemployment rate climbed from a 19-year high of 7.1 per cent in May to 7.4 per cent in June – the highest since November 1998
Number without work climbed from 923,000 to a record-high 992,300
Close to a million people unemployed for the first time ever – surpassing 960,200 record set in December 1992
Unemployment increased even though 210,800 more people were employed as COVID-19 shutdowns eased
That was because the participation rate increased from 62.7 per cent to 64 per cent as more people looked for work
Source: Australian Bureau of Statistics labour force data for June
‘It distorts wage relativities between lower and higher paid jobs, it dampens incentives to work, it hampers labour mobility and the reallocation of workers to more productive roles, and it keeps businesses afloat that would not be viable without ongoing support,’ it said.
Prime Minister Scott Morrison and Mr Frydenberg are announcing the future of JobKeeper, following a review into its first three months supporting 960,000 employers.
The Treasury review, finalised at the end of June, found JobKeeper had helped businesses that had suffered an average turnover decline of 37 per cent in April 2020, compared with the same month in 2019, and staved off closures.
The government is also making an announcement about the doubling of JobSeeker unemployment benefits.
As of May more than 1.6million Australians were receiving JobSeeker, which combines the old Newstart unemployment benefit along with sickness and bereavement payments.
Last month close to one million people, or 992,300 Australians, were officially unemployed for the first time ever, as the jobless rate rose to 7.4 per cent, the highest level since November 1998.
The JobKeeper package, originally costed at $130billion, was announced on March 30, a week after JobSeeker was effectively doubled with a temporary $550 a fortnight coronavirus supplement.
The doubling of the dole ends on September 24, which could see JobSeeker either revert back to its original $565.70 figure, from $1,115.70, or be permanently raised from its base rate.
The government is also making an announcement about the doubling of JobSeeker unemployment benefits, which end on September 24. Pictured is a Centrelink queue at Darlinghurst in Sydney’s inner east
Treasury said any dole increase would have to be balanced with encouraging the unemployed to get a job.
‘In addition, the introduction of enhanced income support under JobSeeker may also be affecting incentives to work,’ it said.
Existing JobKeeper and JobSeeker payments are continuing until the end of September, as legislated, and both schemes are being extended.
The Melbourne lockdowns, expected to last six weeks, are estimated to be costing the Victorian economy $1billion a week, in a city that makes up a quarter of Australia’s economic activity.
Treasury is releasing a full economic statement on Thursday as a prelude to the October budget, delayed because of coronavirus.